AllThingsVentured Profile picture
Jul 11, 2021 7 tweets 3 min read Read on X
Even with the very weak current IMO regulations, UNCTAD expects the fleet to slow by 6.7% this decade. An extra ~1% of new ship capacity per year will be needed to offset in addition to ~2% per year to replace old ships. Compare this to a #drybulk orderbook of just 5.6% today. Image
#Drybulk demand grew at a CAGR of 4.7% per year since China was admitted to the WTO. Even if this slows SIGNIFICANTLY to 2.5%, this means to maintain the very tight supply/demand balance we see today, we will need 5%+ of new ship capacity to deliver each year this decade. Image
In DWT (capacity terms) this 5%+ per year of new ships needed is equivalent to ~50M DWT. This is more ship capacity than has been built in each of the past 8 years. Although not a problem in isolation, shipyards are already full through 2023 ships from other fast growing sectors Image
Over the same 8 year period shipbuilding capacity has actually been contracting and expected to contract further. All other sectors will need the same extra ~1% of new capacity per year to offset slow steaming and shipbuilding capacity is already sold out before this effect. Image
With shipbuilding capacity for large ships sold out through 2023 despite one of the lowest cross-sector orderbooks in history on a percentage basis of the global fleet, it is clear that shipbuilding capacity will be grossly insufficient by 2024. Image
Despite persistently high rates in the last cycle starting in 2003, it took many years to build enough shipbuilding capacity and then many more years to build enough ships to meet demand leading to a 7 year period of very high #drybulk shipping profits. Image
Although every cycle is different and this is NOT the last cycle, many of the same forces are at work. I expect an extended period of high profitability as forces constraining supply will cause supply to consistently lag demand making shipping a top performer in the coming years.

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More from @AllVentured

Oct 8
1/ Buried under all of the Middle East and port strike chaos headlines, a very important debate about a carbon tax on shipping is ongoing at IMO meetings this week.

ft.com/content/407307…
2/ Support for a carbon tax is gathering momentum as it would be one of the most simple, economic, and effective ways to lower carbon emissions in the shipping industry. On the other side of the debate are middle income countries responsible for the lion's share of world trade
3/ These major exporters oppose it because it will increase the cost of traded goods which is partially borne by the producer and partially borne by the consumer. Image
Read 8 tweets
Feb 23
🚨 Breaking 🚨

Biden Admin sanctions 147 vessel Sovcomflot fleet as foretold in the below thread.

A nice gift on a Friday. If history is a guide and we can use COSCO sanctions as a proxy, Tanker longs should do exceptionally well next week.
Image
These sanctions actually DO work.

What few vessels the US has sanctioned due to Russian oil prior to Sovcomflot have been mostly stranded due to the sanctions.
Image
Image
I never trade after hours but felt compelled to today. Picked up a good chunk of $IMPP (had already been buying this dip earlier this week) and $TNK at fair prices. Tried for some $TNP as well but only got a bit.

I count 42x aframax and 15x suezmax in the sovcomflot fleet. If all of these are sidelined, I expect midsize rates to benefit the most which is why I bought the above. $NAT also a good option but already bid up much higher after hours.
Read 5 tweets
Oct 9, 2023
1/ Just like with the Russia/Ukraine conflict #tankers are likely to be the #1 beneficiary of renewed enforcement on Iran oil sanctions and associated changing trade patterns 🧵:

2/ The Biden Admin is in a tough spot. If Iran orchestrated the latest conflict in Israel, they will have to respond. How to do this without impacting oil prices? After all, turning a blind eye to existing sanctions has allowed Iran to increase exports by a huge ~500kb/d over the past year keeping a lid on prices.
Image
3/ Just like Russia/Ukraine, the strategic objective of the Biden admin will be to keep the oil flowing but limit the economic benefit gained from it by Russia/Iran as attempted with the price cap. Now that we know that price caps don’t work, what better way to do this than to drive up the cost to ship it?

Read 8 tweets
May 9, 2023
1/ Even if Biden succeeds at forgiving up to $20k of student loan debt and the Supreme court rules it as legal, it only eliminates $430B of the $1.6T of student loan balances currently in forbearance and scheduled to begin repayment by the end of August. Image
2/ Even though 71% of borrowers will still have a balance after $10k-$20k forgiveness or will not receive any forgiveness due to income, ALL eligible federal student loans currently remain in forbearance until this is resolved. Image
3/ Are those that know that they do not qualify or will have a remaining balance after forgiveness still making payments?

🚨🚨 NO 🚨🚨

Just 1.16% of borrowers continued making payments when 71% will still owe EVEN IF forgiveness goes through. Image
Read 9 tweets
Apr 28, 2023
I had previously speculated that China's impressive >10% growth rate in coal production was unsustainable.

YOY production growth continued to decelerate in March and is now being outstripped by power demand leading to a near doubling of imports YTD.

breakwaveadvisors.com/insights/2023/…
In prior years which saw abnormally large % increases in coal production like 2011 and 2015, the following year tended to be flat to down. Meanwhile China just approved the most new coal fired power gen capacity since 2015. ImageImage
Similarly India, the world's second largest producer and consumer of coal, managed a highly unusual and completely unsustainable increase in coal production last year to keep up with demand: reuters.com/markets/commod…
Read 7 tweets
Mar 11, 2023
1/ Regardless of what you believe about the $SIVB outcome, instead of the lazy gradual decline, deposits are about to fall off a cliff.

Depositors already had every reason to take their money elsewhere for yield, and it just became irresponsible not to:

2/ This is terrible for bank profits.

Banks will need to either pay a competitive rate on deposits or lose them.

How much of this is baked into bank earnings estimates?

3/ Regardless of what the resolution is with $SIVB, it seems likely that banks will tighten lending further and make fewer loans.

Fewer loans on lower margins, yet $XLF still well above pre-covid highs. Image
Read 5 tweets

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